Multi currency investing is important because inflation is rising and any currencies will lose purchasing power. There are only three ways to combat this problem.
#1: Invest in real estate.
On the subject of real estate, Merri and I buy as much as we can and then try to make it better. Last year one of our messages showed Merri and me clearing one of our many meadows. The results are blooming this spring.
Here is the meadow (once brush filled) now.
#2: Invest in commodities.
Water and timber. That’s us!
Here I am heading for our deep woods hot tub surrounded by timber. Assets that are fun to own and just grow and grow.
We steadily improve our land. Many of our woods like like this to begin.
And like this when we are through.
#3: Invest in products and services through the ownership of shares.
When you buy shares, your profits can be enhanced by buying shares in strong currencies.
A recent message looked at how to select multi currency shares of good value…one that are likely to grow.
Now may be a time to start looking at major market multi currency stocks. Here is the thought process I used to arrive at this conclusion.
The first thought. We can expect a mature economy to grow about 3% per annum.
This is a bell wether…a measure to watch for all major stock markets.
Thought #2: Stock markets should grow along with the economy plus reward investors with a risk premium.
Major currency savings accounts…the seemingly safest place to park extra money… should offer 3% or 4%. This keeps up with growth.
Major currency bonds…seemingly safer than shares…but not as safe as savings accounts should earn 5% or 6%. Shares then should be expected to grow 7% to 10%.
Of course we want to do better than average!
Thought #3: If a mature stock market grows slower than 7% to 10%, we may expect a spurt of catching up (time to buy).
If a major market grows faster than 7% to 10%…then we may expect a slow down…time to sell.
Thought #4: Emerging economies are expected to grow faster than major economies…even twice as fast…6% per annum. Emerging stock markets reward an even greater risk premium so they may rise faster as well…up to 14% to 20%.
The extra premium is because emerging shares are also more volatile and likely to fall quickly.
Over the past few years…easy money from sub prime loan sources have made it easy to borrow to invest in emerging markets. This extra money going into small markets pushed prices up and reduced the feeling of risk. Investors began to invest disproportionate amounts in the risker emerging markets.
Because these emerging markets are small, the extra investing pushed values higher than they should be which means they will also fall faster.
During the recent global economic downturn, the major markets have dropped…as they should. This is like a diet. Over valued share values are trimming down…so they should reach a point where they are a good value to buy.
Emerging markets also should be trimming down, but have not in a way we would expect. This means that they probably are not such a good value and they have higher risk and offer less potential reward.
This is how one “gains the most”…buying something that has fallen (or not risen as fast as it should)…not something that has risen quickly without some foundation of reason.
We can use a three step search for good values.
The first step is to spot major distortions…such as a time when all shares should drop..but do not. This is what this article is about…major markets have dropped. Emerging markets have not. This suggests that major markets are turning into better values than emerging markets.
Next within the major distortion, we look for the best valued major markets. Based on p/e ratios…dividend yields and relative pricing histories we look for markets that may have fallen more than others (or not have risen as fast).
The third step is to search for specific shares in those good value markets within the major distortion that offer good value..ie they are selling at
p/e ratios lower than most…paying higher dividends and have better growth prospects…are more noticed in the market…and have growing earnings.
This thought process has led me to invest in the Jyske Invest Major Market Equities Fund.
An upcoming message looks at this fund in more detail.
Until then, good multi currency investing.
Learn why and how to know more about multi currency investing.
You can get more information on the Jyske Invest Major markets Equity Fund from Thomas Fischer, Senior Vice President at Jyske at firstname.lastname@example.org
Now Jyske Bank has become one of the few global banks that has registered with the American SEC so American investors can more easily use the bank’s global services.
Even better you can meet me and Thomas at our next May 23-25 International Investments and Business Course.
Come enjoy walking the meadows with us at the farm.